Personal Budget

At the beginning of the school year, Craig Kovar decided to prepare a cash budget for the months of September, October, November, and December. The budget must plan for enough cash on December 31 to pay the spring semester tuition, which is the same as the fall tuition. The following information relates to the budget:

Cash balance, September 1 (from a summer job)	$6,250
Purchase season football tickets in September	90
Additional entertainment for each month	220
Pay fall semester tuition in September	3,400
Pay rent at the beginning of each month	300
Pay for food each month	170
Pay apartment deposit on September 2 (to be returned December 15)	400
Part-time job earnings each month (net of taxes)	780

a. Prepare a cash budget for September, October, November, and December. Use the minus sign to indicate cash outflows, a decrease in cash or cash payments.

Craig Kovar
Cash Budget
For the Four Months Ending December 31
	September	October	November	December
Estimated cash receipts from:
Part-time job	$	$	$	$
Deposit
Total cash receipts	$	$	$	$
Less estimated cash payments for:
Season football tickets	$
Additional entertainment		$	$	$
Tuition
Rent
Food
Deposit
Total cash payments	$	$	$	$
Cash increase (decrease)	$	$	$	$
Plus cash balance at beginning of month
Cash balance at end of month	$	$	$	$

Feedback

Sometimes an item may be a decrease in one period and an increase in a different period.

Review the definitions of static budgets and flexible budgets.

What weaknesses are shown by this cash budget?

b. Are the four monthly budgets that are presented prepared as static budgets or flexible budgets? Static

c. What are the budget implications for Craig Kovar?

Craig can see that his present plan will not provide sufficient cash. If Craig did not budget but went ahead with the original plan, he would be $ short at the end of December, with no time left to adjust.